Leela Barham looks at the projected cost to community pharmacy in England from the national minimum wage increase that will roll out in April. A boost to pay will be welcomed by employees, but finding close to £200 million to fund it is a tough ask for contractors

The Government announced in November 2023 that the national minimum wage (NMW) would be rising in April this year. The increase is record-breaking: for those aged 21 and over, it will rise by £1.02 an hour, or 9.8 per cent, to take it to £11.44.

Direct impact

This will have a direct impact on staff currently working within that pay bracket. Although it’s not quite clear how many staff work at the NMW level today across community pharmacies in England, Community Pharmacy England (CPE), in its response to the announcement back in November 2023, noted: “The majority of pharmacies employ staff on or around the NMW.”

Mike Hewitson, a Dorset contractor and former National Pharmacy Association board member, explained: “The only types of employee that are paid above the NMW are NVQ level 3 technicians and pharmacists.” What this means in practice for Hewitson is that “of my 25 employees, it’s around 21 or 22 that are covered by the NMW”.

For other contractors, fewer staff will be on NMW. Anil Sharma, the East of England regional representative for the CPE committee and a contractor running a small number of community pharmacies, as well as sitting on two LPCs, explained that in his pharmacies, “only the delivery drivers are on the NMW”. Many are not, however, getting much more, with some “being paid 50p more per hour [than the NMW],” he noted.

The NMW will affect a lot of staff working in community pharmacies up and down England, even if the precise number isn’t known.

Indirect impact

The true cost of the increase is not just paying those on NMW today more come April, but the need to pay other staff more as well. Differentials are routine.

As Hewitson explained: “Some staff are paid slightly more than the NMW – those who have supervisory responsibility over others, for example.”

Sharma sees this too with his staff. “The NMW has an impact on every role within community pharmacy,” he says. “Our staff in the pharmacy, they have skills, they’ve done training and the public expects that. They want to receive the right advice. So staff think that they should get more than the NMW and we need to keep paying more than that.”

But that’s tough when the rise is around 10 per cent. “It’s an unsustainable rise,” says Hewitson.

It also goes against the calls for pay restraint that have come from the Bank of England, in a bid to counter inflation.

Sharma points to competition in the labour market too. “We can’t afford not to maintain a differential above the NMW,” he says. “We can’t lose staff. We’re competing with big multinationals like Sainsbury’s, McDonalds and others for staff.” There’s competition too from other parts of the NHS, especially primary care.

Taking both the direct and indirect impacts of the increase in the NMW into account, Hewitson suggested in November 2023 that it might cost £110 million. Now he thinks it’s closer to £180m.

CPE puts the cost between £150m and £195m. Its calculations are based on 2022 workforce data from the Health Education England community pharmacy workforce survey. CPE has also factored in employers’ knock-on costs such as national insurance and pension contributions.

Tough choices

For contractors, there are limited options to help them deal with the bigger wage bill. “Most pharmacies are having to look at reducing hours for staff,” Hewitson said.

But that’s not likely to be possible for many. “I don’t know any pharmacies running with more staff than they need,” Hewitson added.

Sharma is exploring how to bring in more money. “I’m looking into charging for deliveries – something that we’ve really resisted doing so far,” he said.

He knows that many who use the delivery service are vulnerable and many wouldn’t be able to pay for the service. These are the same people who already struggle with the cost of living. He recounts how one of his delivery drivers delivered to a patient who had no heating on in January.

CPE has made clear just how difficult absorbing higher wage costs will be against the backdrop of what it describes as “underlying core funding remain[ing] at critically low levels.”

CPE’s argument to government is essentially that community pharmacies are different to other businesses because they can’t pass on higher costs to customers. Therefore, they should receive government help.

The threat continues to come from closures and negative impacts for patients and communities. Sharma echoes this. “What will happen is that more and more pharmacies will close,” he says. That could be a false economy though: “Patients need to access their medication. If they can’t get it from their community pharmacy, we’ll see them ending up in A&E. That will just cost the NHS more.”

CPE wants government to consider the pressures community pharmacy is under in negotiations for a new sector contract. Time will tell if that proves enough to help manage the wage bill increase as well as the host of other cost pressures the sector is under.